International Worker Classifications Terms You Should Understand

The global economy has seen a shift from full-time employment to more freelance and contracted work arrangements. In simple terms, part-time and contracted workers are not generally entitled to the same benefits and protections as full-time employees. As gig work and part time work continues to become more common, many countries are examining workers’ rights and protections–companies based in the United States with international offices may be surprised to learn that in some cases, contracted workers and full-time employees have some of the same rights.

Incorrect classifications of workers are a big risk to global businesses, who may be sued for back wages and benefits pay when misclassified workers conclude their services. Businesses may also be subject to fines and back taxes for misclassification of their workforce.

Full-time employees

Full-time employees have an agreement with their employer to work at least 35 hours a week (typically) and receive a salary and benefits in return. Full-time employees have more rights and better access to benefits than contractors or part-time employees, such as minimum wage, paid vacation, sick pay, parental (paternity/maternity/adoption) leave, emergency leave, social safety net contributions, and statutory advance notice if their employment is ending.

Notably, at-will employment is unique to the U.S., and organizations should carefully consider the risks of firing full-time employees that are based internationally.

Part-time employees

Part-time employees work fewer hours than full-time employees but receive many of the same benefits of full-time employment. Part-time employment is common in the US, but less common internationally, especially in eastern Europe.

Contractors

Contracted workers sometimes known “gig workers” are a growing subset of the workforce, with companies like Uber, Postmates, and Amazon relying on independent contractors to support their companies’ services. Use of independent contractors may become even more common among organizations as they grow globally, as it may seem like a shortcut to leveraging human capital on an international scale. Contractors do not have the same rights to benefits that full-time employees have.

Given the growing use of gig workers and the resulting lack of job security and access to benefits these workers have, some countries are passing legislation to help provide more security for these workers.

For example, in the UK a new “worker” classification was created which entitles workers to certain rights and protections, including statutory rights, though they may not have access to the same employment benefits.

In some instances, contractors may be employed through an agency for billing and to save themselves the hassle of starting their own company and/or being self-employed. France passed legislation in 2017 creating “portage” companies. Freelance workers can enter into employment agreements with a portage company to allow them to obtain the benefits of employment and maintain the flexibility of freelance work. Portage companies do not manage day-to-day work, but manage things like employee benefits, payroll, billing, and time off.

Alternatively, companies may choose to engage agencies for the provision of their labor. In the UK, contractors may be both workers and employees if engaged through an agency. In Italy, there are stringent limitations on the use of agency workers, specifically contractors cannot exceed 1% of the total number of permanent employees, cannot replace workers on strike, and cannot replace a collective dismissal of other workers who did the same or similar jobs.

Other classifications of workers that exist include:

Apprenticeships, which provide on-the-job training across a variety of sectors, though apprentices may not have access to the same rights as full-time employees, depending on the location of the program. In some countries, like the UK, apprentices have some rights, which may include holiday pay.

Self-employed workers, which are similar, but not quite the same as contract employees. Rights for self-employed workers vary depending on their residency, but they generally do not have the right to things like minimum wage and paid leave.

Three broad worker status classifications are common globally, while the rights and benefits each group is entitled to may differ between countries. The use of independent contracts is becoming more common, and as a result, some countries are passing legislative action to ensure protection for those employees.

If you’re planning a global expansion, let us know how we can help, whether that’s avoiding common worker classification mistakes, or hiring employees on an international scale.

Nancy Cremins

Nancy Cremins, Chief Administrative Officer and Gerenal Counsel, joined Globalization Partners in April 2016. Nancy is known as one of Boston’s top lawyers for startups and entrepreneurial ventures, having been named as a Top 50 Women in Law, one of Boston’s “40 Under 40,” and “Fifty on Fire.” Prior to joining Globalization Partners, Nancy got extensive experience in the areas of employment law and conflict resolution over the past 10 years at notable firms such as Gesmer Updegrove LLP and Robinson & Cole LLP.

This material has been prepared for informational purposes only, and is not intended to provide, nor should you rely on it for, legal, tax, or accounting advice in any jurisdiction. You should consult your own legal, tax, and accounting advisors as part of your expansion plans.